Standard & Poor's today raised its long-term credit rating on Rostelecom to B- with stable outlook

As mentioned in S&P’s press release, the rating reflects Rostelecom’s dominant position in the Russian international and domestic long-distance telecommunications market (ILD and DLD respectively), continued growth in demand for telecom services, the successful debt rescheduling and improved financial profile.

In 2001 — 2002 Rostelecom has undertaken a number of steps aimed at restructuring the Company’s obligations to foreign and domestic creditors.Particularly, in 2001 Rostelecom restructured its obligations to RTK-Leasing on leasing payments in the amount of USD 120 mln. In March 2002, the Company fully repaid its debt to Telecom-Italia ahead of schedule. Same month an agreement was reached with Sberbank of Russia on rescheduling Rbl 200 mln (USD 6.5 mln) worth of obligations. Currently the Company is finalizing negotiations on restructuring over USD 100 mln of its debt to the Ministry of Finance of the Russian Federation.

As reported previously, in 2000 Rostelecom restructured USD 100 mln Merrill Lynch loan.

As a result of the above-mentioned efforts Rostelecom plans to reduce the outstanding amount of principal debt to USD 152 million by the end of 2002 versus USD 224.5 mln at the beginning of the year.

On the revenue side, a twofold increase in the linear part of the Integral Settlement Rate (IST) used by Rostelecom for settlements with regional operators for DLD traffic transit was an important achievement of 2001. It reduced the extent of cross-subsidies in the sector, while Rostelecom’s revenues from regional operators for DLD traffic transit as a result of only the first increase showed a 43% growth in annual terms.

“Two notches rating upgrade is a positive news, reflecting the management’s efforts to improve the Company’s financial standing and reduce its debt load. Rating B- puts us in a leading position among Russian fixed-line telecom operators. We hope that further improvement of Rostelecom’s financial performance as well as expected revenue growth resulting from an aggressive marketing strategy will lead to a positive change in the outlook and further credit rating upgrade”, Vladimir Androsik, Finance Director of Rostelecom, said.

Rostelecom Headquarters Address: 14, 1st Tverskaya-Yamskaya street, Moscow, 125047, Russia

Phone: +7 (095) 972–82–83 Fax: (095) 787–28–50